LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 7170 NOTE PREPARED: Feb 11, 2025
BILL NUMBER: SB 426 BILL AMENDED: Feb 10, 2025
SUBJECT: Water Utilities.
FIRST AUTHOR: Sen. Koch BILL STATUS: As Passed Senate
FIRST SPONSOR: Rep. Soliday
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: Nonjurisdictional Water Utilities’ Oversight: This bill includes water utilities
within the scope of the statute that subjects wastewater utilities that: (1) are not under the jurisdiction of the
Indiana Utility Regulatory Commission (IURC) for the approval of rates and charges; and (2) have been
issued one or more enforcement orders by the department of environmental management; to a series of
oversight actions by the IURC for each additional enforcement order, including rate review, rate regulation,
and the initiation of a receivership proceeding. It also makes a conforming amendment to the statute that
governs the process by which water utilities and wastewater utilities may withdraw from the jurisdiction of
the IURC.
Utility Consolidation: This bill amends the statute governing the acquisition of water utilities and wastewater
utilities to require the IURC to consider and authorize mechanisms to allow utility companies to integrate
into their systems, invest in, and earn on acquired utility assets, subject to a finding by the IURC that the
proposed mechanism is just and reasonable and in the public interest.
Infrastructure Improvement Cost Factors: The bill also amends the statute governing the recovery of costs
for eligible infrastructure improvements made by water or wastewater utilities to provide that, in the case of
a public utility (as defined in the Indiana Code), "infrastructure improvement costs" eligible for recovery
include: (1) deferred depreciation expense; and (2) post in service carrying costs; for the eligible
infrastructure improvements.
Compliance Protection: It also adds language to the Indiana Code chapter governing public water supplies
to provide that a complaint: (1) seeking damages from a water utility; and (2) arising out of an alleged
exposure to drinking water supplied by the water utility; is barred if the water supplied by the water utility
met applicable regulatory standards under specified federal and state law.
Dam Closure: It also amends the Indiana Code section prohibiting the Department of Natural Resources
(DNR) from regulating certain activities within the 100 year flood level of a water supply reservoir owned
and operated by a municipality or a public utility for the purpose of providing water utility service to the
public to also prohibit the department from ordering the closure or removal, or the partial closure or removal,
SB 426 1 of: (1) a dam that forms such a water supply reservoir; or (2) a dam that forms or contains a body of water
that is used to supply one or more private water wells; if the closure or removal, or the partial closure or
removal, of the dam would impact the provision of water utility service to the public or the supply of water
to one or more private water wells.
Effective Date: Upon passage; July 1, 2025.
Explanation of State Expenditures: Nonjurisdictional Water Utilities’ Oversight: The workload of the
IURC may increase by the statute’s addition of water utilities to IURC oversight actions after enforcement
orders. Depending of the number of water utilities that undergo enforcement orders, the IURC’s workload
may increase significantly. This bill prohibits the IURC from informally reviewing a water utility’s rate
structure and asset management within 12 months of its first enforcement order.
Utilities that have two or more enforcement orders within two years and were not initially under the IURC’s
jurisdiction must go under the IURC’s jurisdiction. [Between CY 2023 and 2024, six municipal wastewater
utilities were subject to enforcement orders. Three have started addressing the orders from the Indiana
Department of Environmental Management (IDEM).]
Utility Consolidation - This bill will increase the workload of the IURC to adopt rules to encourage utility
consolidation. Increases in workload are expected to be accomplished within existing resource and funding
levels.
Dam Closure: The bill would also prohibit the Department of Natural Resources (DNR) from closing water
supply dams and dams that supply water to private wells, including the Williams Dam of Lawrence County.
As a result, the bill would decrease DNR workload concerning dam closure.
Additional Information - The operating budget of the IURC is funded by regulated utilities operating in
Indiana. The rate at which to bill the utilities is based on the agencies' budgets, less reversions, divided by
the total amount of gross intrastate operating revenue received by the regulated utilities for the previous fiscal
year. Based on this formula, utilities are currently billed approximately 0.12% of their gross intrastate
operating revenues to fund the IURC.
The DNR is currently conducting a feasibility study to decide whether to remove the Williams Dam or repair
the dam and leave it open.
There are also three low head dams that are currently subject to closure and removal by the DNR; Thompson
Mill Dam, Emrichsville Dam, and Silver Creek Dam. Emrichsville Dam is owned by the Indiana-American
Water Company and has secured federal grant funds for the dam’s removal. Indiana-America Water
Company switched the utility to well thirty years ago.
The Silver Creek Dam removal is currently on hold due to lack of permits and is subject to court proceedings
filed by the city of New Albany to block the dam’s removal. The DNR is currently in the process of removing
the Thompson Mill dam in November, 2024.
Explanation of State Revenues: Infrastructure Improvement Cost Factors: Changes to how depreciation
is counted for utilities could impact rates paid to utilities. Any change to utility rates paid in the state would
increase revenue the state receives from sales tax collections. Any change in sales tax revenue is
indeterminable but expected to be small.
SB 426 2 Utility Consolidation: If water and wastewater utility consolidation increases after the adoption of IURC
mechanisms for consolidation, sales tax revenue could be impacted to the extent that utility bills are
impacted.
Additional Information - Sales Tax revenue is deposited in the state General Fund (99.838%), Commuter Rail
Service Fund (0.131%), and Industrial Rail Service Fund (0.031%).
Explanation of Local Expenditures: Nonjurisdictional Water Utilities’ Oversight: Municipal water
utilities that are not under the IURC’s jurisdiction may be subject to increased workloads and reporting
requirements should they fall into the commission’s jurisdiction for receiving two enforcement orders within
two years.
Dam Closure: Municipally-owned dams may have increased workload due to the new statute’s prohibiting
the DNR from ordering dam closures. Municipalities may decide to continue usage of their dams that provide
the supply of water to the public or to private water wells during periods the DNR might have otherwise
prevented such usage through dam closures.
Compliance Protection: Municipal utilities compliant with federal and state water regulatory standards may
have reduced legal costs due to added protections from complaints seeking damages.
Explanation of Local Revenues:
State Agencies Affected: IURC; DNR.
Local Agencies Affected: Municipal Dams, Municipal Water Utilities.
Information Sources: Indiana DNR.
Fiscal Analyst: Abdulrahman Abdulkadri, 317-232-9852.
SB 426 3